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NEWS UPDATES 22 June 2010

Foreign manufacturing investment falls in Malaysia

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Approved foreign investment in Malaysia's manufacturing sector plunged 52 percent to 22.1 billion ringgit ($6.9 billion) in 2009 amid the global economic slump but is expected to rebound this year, the trade ministry told the Associated Press.

In its annual industry report, the ministry said the 2009 foreign investment level was "encouraging" amid the global slowdown, accounting for about 68 percent of total investment in the manufacturing sector.

Overall, it said total approved manufacturing investments fell 48 percent to 32.6 billion ringgit ($10.2 billion) but still above its official annual target of 27.5 billion ringgit ($8.6 billion).

Trade Minister Mustapa Mohamad said the government is targeting 40 billion ringgit ($12.5 billion) in total approved manufacturing investments this year, up 22.7 percent from 2009.

However, for the first four months this year, total approved investments reached only 7.1 billion ringgit ($2.2 billion).

Mustapa insisted the 2010 target might still be reached.

"It is doable," he told reporters Monday. "Normally things move a bit sluggishly in the first half but as the year goes on, it will gather momentum. We already have a few very sizable investments in the pipeline." He didn't give details on the planned investments.

The report said total approved investments in services also shrank by 23 percent on-year to 38.7 billion ringgit ($12.1 billion), with foreign investments in the sector down 40 percent on-year to 3.3 billion ringgit ($1 billion).

However, the ministry said it anticipates greater foreign investment in services this year due to new liberalization measures including implementation of free trade agreements and improved market access under a services pact for Southeast Asia's regional grouping.

The transport, utilities, financial services and telecommunications sub-sectors are expected to be the key beneficiaries of investments in services this year, it said.

Mustapa said Malaysia inked a free trade pact with New Zealand last year and with Chile in April. It is on track to sign an economic pact with India by year-end and to conclude FTA talks with Australia, as well as exploring possibility of trade pacts with the EU and the Gulf Cooperation Council, he said.

The government implemented a fiscal stimulus worth a total of $67 billion ringgit ($20.7 billion) last year, helping to limit the fallout from a recession when the economy shrank 1.7 percent. The economy is forecast to grow 6 percent this year after expanding 10.1 percent year-on-year in the first quarter, its fastest pace in a decade.


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